The Neglected 97% Entrepreneurs Boot Camp – Interview #5

First off, may you be very HIP in 2018 — Happy, Innovative and Prosperous!

I trust you’ve enjoyed the series of stories and interviews I’ve been posting over the past few weeks. Each story is unique because the journey of every visionary entrepreneur is different. Yet, a few patterns are emerging from these success stories of which you’ll want to take note:

A trusted mentor who has real experience and success in raising capital and/or investing in early-stage companies can be an invaluable (perhaps even irreplaceable) asset to you. They’ve already been down the road you’re traveling. Generally speaking, that makes them better able than you to see the potholes, roadblocks, detours, and shortcuts on the road to funding.

The time to practice, refine and re-imagine your pitch and presentation is NOT in the midst of actual investor meetings. Those meetings are far too difficult to get and valuable to your future to waste with ineffectiveness, uncertainty, or worse — embarrassment. Remember, investors don’t usually trust you at first, are busy and prone to dismiss you and your company quickly if you don’t “wow” them right off the bat, and from their perspective, just don’t need your deal all that much, since they see dozens of deals every week. When you get the big meeting, you’ve got to be prepared to “kill it.”

Putting your hypotheses (your idea, business model, approach to solving a problem) in front of investors without first testing them thoroughly is risky because seasoned investors are really good at spotting the weaknesses in your business. The time to test, and if necessary revise, your hypotheses is BEFORE you start pitching investors; the best way to do that work is under the guidance of someone who invests money in early-stage companies regularly. Ideally, you want someone who has a framework within which to assess your strengths and weaknesses against the profiles of hundreds of other successful and non-successful ventures.

I know that some of you who read this blog are already well beyond the start-up stage. Many of your companies are already in the market, already in revenue, perhaps already through a stage or two of funding. For you, efficient growth and scalability is probably the main focus. That’s the situation David Fernandez, Founder, and CEO of Net Clearance (www.netclearance.com) found himself in recently.

David recognized that peer-to-hub financial transactions would be a natural evolution in the online payments sector. Peer-to-peer transactions had already become a standard method for sending and receiving money from and to other people. But credit card providers had a well-entrenched system for peer-to-hub transactions — think of the peer as you and the hub as a cash register at a grocery store, gas station or department store. Still, David recognized an opportunity — creating software and systems to link your mobile phone to the cash register of a merchant, bypassing the credit card transaction entirely. Merchants could save millions in processing fees annually. People could pay for things directly from their bank accounts, bypassing the need to swipe a card and avoiding the interest charges on their cards. Finally, merchants could obtain far more customer data than they could through a credit card swipe at the register.

So, David launched Net Clearance and focused on European markets where both people and companies were very open to this new form of payment that was grounded in the peer-to-peer financial transactions they had already been accustomed to. Within a short time, Net Clearance was being used throughout Scandinavia and Northern Europe — connected to more than 35,000 merchant payment terminals. It was time to scale up further and enter additional markets, including getting a footprint in the US market. David knew that would take money. About that time, David was introduced to George Kenny and decided to participate in the Entrepreneur’s Bootcamp. I caught up with David recently to discuss his experience with the Bootcamp.

You were already well into revenues, seasoned for 5 years with a proven model . . . why was the Entrepreneur’s Bootcamp appealing to you?

I was ready to scale up the business. All the money I’d raised previously had been from friends, family, a few angel investors. We’d been able to raise enough capital to get to profitability. But the amount of money we needed now, to scale up in a big way and enter new markets, was simply much more than I’d raised in the past. I knew I’d have to go to large, sophisticated investors and I didn’t know any. More importantly, I didn’t have experience with how large investors think, what’s most important to them, how they view risk and what about our opportunity would be most compelling.

So your goal was to hone your pitch for a more sophisticated investor?

Yes. Our presentation had been successful with friends and family and a couple of angels. George mentored me to re-imagine the pitch for a different breed of investor. The pitch was focused on the features and benefits of the product we had created and why it made sense for merchants to adopt it. It lacked a “wow factor” that would captivate a large investor in the first few minutes. I think we had about 30 slides in our presentation. After George helped me re-imagine it we ended up using only one of those original slides.

What was the major revelation for you in ing through that process?

George helped me to create a specific context for those investor meetings that I’d be having. The context I had was “get funded.” The context we created was “get a second meeting.” What I learned was that initial meetings almost never lead directly to funding. You’re being screened. They look at so many deals every month, there’s no way you’re going to get funded in a first meeting. And that’s different from meeting with a friend or an angel you already know or a family member. Sometimes, all it took for me at that stage was one meeting. This was a different game. The pitch had to get us a second meeting. To get that we had to be really impactful from the start — leave them craving for more.

Hence the need for the “wow factor” you mentioned . . .

Exactly. We had to create a pitch that in the first three slides a sophisticated investor could really get who we are, what we do, why we do it and how we do it. That takes a lot of honing and it takes practice to make it really powerful. And I was already in the fundraising process while I was doing the Bootcamp.

Were you out raising capital while going through Bootcamp?

Yes. Time was a factor. We needed capital, needed to grow and expand, leverage the market opportunity we had. Once the pitch was re-imagined and I’d practiced it sufficiently I started using it immediately.

What were the results?

I raised $500,000 while still going through the Bootcamp.

Wow!

That gave me a lot of confidence that George was steering us down the right path.

So the new pitch, combined with your innovative product and market proof, got results?

We had the raw materials — five years in business, good IP, market proof, revenues of about $4 million. The new pitch helped me tell that story in a really compelling way. The $500,000 was proof. But, while in the Bootcamp I was made aware of a “Fin Tech” contest sponsored by Price Waterhouse Coopers. We applied and were one of 700 companies vying for prizes. The top 12 Fin Tech scale-up companies from around the world would be awarded. And the FIRST thing I had to do was pitch the initial panel that determined whether you even qualified. We had 5 minutes. So, George and I worked to further hone the pitch — which was designed to be more like 15-20 minutes. Again, we went through that honing process.

How did it go?

We were one of the 12 honorees and one of only 2 from the U.S. George’s mentoring and the structures he used to help me hone the pitch were really the difference-maker. Don’t get me wrong, I put in a lot of time and effort during the Bootcamp — research, reading, assessment of other pitches and practicing ours. But George gave me a process I could rely on, so I knew I wasn’t wasting valuable time.

Are you parlaying that success into the funding you need today?

Absolutely. I have a busy schedule now, filled with appointments with investors we met during the Price Waterhouse Cooper’s competition and references from George as well. I feel so confident doing the pitch these days. I pitched many of these investors in a group format at the competition. Now, I’m going back for the one-on-one from a confident place, because I know that our business is worthy of the investment and I know the pitch I have — which continues to evolve as we evolve — effectively communicates what those investors need to hear. If it hadn’t, we wouldn’t have finished among the top 12 out of 700 companies.

Any advice to entrepreneurs from your experience?

You probably already have some advisors. I did. One, in particular, was advising about our pitch and what she was advising didn’t mesh with what George was advising. I went with George’s ideas, because he IS an investor, HAS risked millions of dollars and really knows what it takes to not just get the funding, but end up being successful with the dollars you raise. So, I very highly recommend the Entrepreneur’$ Boot Camp. If you can’t do the Boot Camp, at least get your pitch advice from someone who is an investor and knows what is most important to investors. It wasn’t easy for me to turn down the advice of a trusted advisor. But it was easier for me to do that after having gone through the Boot Camp because I developed such confidence in the approach George was taking me through. That has really helped me in the fundraising arena. I have the confidence to challenge assumptions from others who may think they know what will work but really don’t.

Key Takeaway: The time to hone your pitch is before you get the big meeting with investors because you can’t afford to waste such a meeting. Your pitch simply MUST be compelling within the first few minutes or they’ve probably already stopped listening. The context for the pitch is to get a second meeting, not to receive a check. Getting a second meeting is a major victory that few entrepreneurs get and vastly increases your chances for funding.

About Robert Steven Kramarz

Angel investor and venture fund manager; advisor on investor pitching and investor relations, due diligence, impact investment, Reg. A+, Crowdfunding and Revenue Royalties. He’s author of the recent books _Born to Star_ and _The Road Less Traveled – Raising Capital without Debt or Equity_. He’s currently Executive Director of Intelliversity and active team member of Entrepreneur'$ Bootcamp, Pacific Royalties, 22nd Century Ventures and Vantera Partners, and the advisory boards of another six companies. He works tirelessly to increase the amount of private funding available for innovation, science and impact investments.

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